On Friday, the OECD aims to crack the problem of large multinationals such as Amazon, Google and Starbucks from making billions in sales and associated profits, yet shifting those profits out of the UK to low tax jurisdictions or to places, in Google’s case, like Bermuda, where they pay no tax at all.

It’s a system which has ruffled many feathers – not least those who work for these huge companies, individuals who pay all of their tax bills all of the time.

What is transfer pricing?

Corporations reduce how much tax pay by taking advantage of a technique called “transfer pricing” – transferring profits from the place where goods are actually sold to countries where the tax rate is lower.

Google, for example, says all its UK sales are completed by staff in Ireland. Amazon routes its profits through Luxembourg while Starbucks is headquartered in Amsterdam.

By doing this, profits made in the UK cannot be taxed, costing us as much as £12 billion per year.
Follow @siobhankennedy4 on Twitter.

Topics

Tweets by @siobhankennedy4

One reader comment

Andrew Dundassays:

Our British multi-nationals – of which we have a great many – also use similar “tax-mitigation” measures.
Suppose, say, BP had to pay corporation taxes to each of those countries where BP supplies its products, wouldn’t that cut the tax revenues accruing to the UK? What about Diageo, Unilever GSK and other corporates? We should be careful what we wish for.
Can we afford to lose that much Corporation Tax currently paid by our multi-nationals?